> Your credit card is where your wealth is stored.
Your credit card is just a means of payment (a key). Your wealth is stored at your bank.
All these merchants may have your bank keys, but they can't use it to charge you illegally because they will incur costs (a chargeback fee and then some). It a great system in which both the consumer and the merchant are incentivized to behave correctly...
Facepalm. I can pick 20 small cap stocks that have outperformed the dollar over the past year. That only makes them a good savings vehicle in hindsight.
Confusing short-term speculation with sustainable added value here.
> So chargebacks due to fraud simply wouldn't be there.
That is far from the only reason there is credit card fraud. Actually most credit card fraud is linked to identity fraud (a hacker stealing someone's financial credentials or posing as them on an online/offline store).
Most of the credit card information stolen from Target and Home Depot is not used but sold as quickly as possible on underground forums to "the greater fool" who is willing to take a risk to use it (if it still works).
Because of the chargeback system, those millions of credit cards stolen are not a huge issue for consumers because they can immediately lock down their card. Cards are replaceable keys. If you believe that you've been compromised, chargeback for whatever amount was stolen from you and change cards. It's a pretty incredible system for consumers when you think about it.
Contrast that to bitcoin. Your third-party bitcoin storage service gets hacked, your bitcoin are gone forever. You choose to store your bitcoin locally and you're exposed to physical theft (like keeping cash under your mattress).
Bitcoin does not solve the fraud/theft problem. I facepalm every time I hear that argument. Chargebacks are omnipresent today because they protect consumers because theft has always been and will always be part of any financial/payments system — simply because thieves don't target "how" you pay (push vs pull doesn't matter) but target where you store your wealth.
1. Check out Stellar and Ripple who solve this better than BTC.
2. Is a volatile virtual currency powered by market speculation the best alternative for inflation-ridden currencies? I facepalm every time I hear this argument.
3. and 4. Agreed. Bitcoin is great for merchants. Unfortunately economic demand comes from consumers. More merchants accepting bitcoin does not imply more consumers adopting it, in particular because those same merchants accept traditional payment methods in parallel (credit cards). That's a big red flag for me.
Large retailers like Amazon don't save on their margins if they start accepting BTC because 1) BTC won't be used by any significant number of their users 2) they already get special discounts for CC processing from companies like Visa and Mastercard because of the huge volume they handle.
Fraud is as applicable to credit cards as to bitcoin. You store bitcoin with a third party service means you rely on them to keep their servers secure and hope that hackers don't obtain your credentials/identity information to log in and steal your bitcoin. I would argue it's even worse with BTC because their is no fraud protection.
Chargebacks are an issue for merchants, but a huge advantage for consumers. Ultimately the economic demand comes from the consumer and not the merchant, that is why chargebacks are still omnipresent in ecommerce today.
Two areas bitcoin could have addressed are remittances and smart contracts, yet better systems are emerging to solve those problems (Ripple, Stellar, Ether).
Your arguments could be valid in a world where everyone uses bitcoin and doesn't touch fiat. This is not the case. Bitcoin is a great technology in theory but its practical applications are quite limited.
This is something they unfortunately do not address, but it's the biggest problem with such systems and a major part of the reason Ripple hasn't caught on.
If your money transfer model includes gateways, then trust is involved. You have to trust the gateways (local banks or exchanges) to make the conversion.
The gateways on each end would also want to take a fee.
Add to that the (MASSIVE) cost of compliance globally, and the costs of the model described by Stripe may not be much better than that of existing services (TransferWise, Western Union, etc.).
It's just an absolutely mind-bogglingly large, long, and costly endeavor, and the end results may not be worth it.
And the Alienware promotion? Alienware is used primarily for video gaming. There's quite an overlap between the demographics that play video games and own bitcoin ("geeks").
What will the government do with Bitcoin the day a report comes out that American citizens have been killed in a terrorist operation financed by bitcoin?
If you want freedom, learn how to algorithmically trade Forex.
Edit: Downvote? I'm serious about this. Trading is the only activity I know that gives you
1) income
2) no boss to report to
3) no employees to take care of
4) location freedom (e.g. can be done from anywhere)
5) relatively low starting costs
6) low starting risk (you don't need to work 2+ years to figure out if your company will actually make money)
7) a market you know will always be there
8) an ability to be totally hands off with
algorithmic trading
Most people think this is a pipe dream — perhaps that explains the downvotes. It's not. I live off semi-algorithmic Forex trading and know many others who do too.
There are many more recent articles on the same topic — internet technology may have changed a lot, but consumer behavior hasn't. Consumers still want simple and predictable pricing.
When's the last time you paid at a paywall? It's just that the mental cost of calculating how much I'm spending when I'm spending loads of fractions of pennies everywhere is pretty big. To cancel your ads, just pay the monthly $10. It's simple, predictable, and covers you for all ads all the time.
Yes I agree that bitcoin could be useful to the unbanked or in high inflation countries. I don't have enough knowledge of those markets to elaborate.
I was answering the author who was advocating bitcoin's ease of use as compared to credit cards.
Credit card use is not a limited world view though. Credit card networks are pervasive all over the world. And in the areas they aren't, I don't think a volatile digital asset is at the forefront of people's minds when it comes to payments. A lot of innovation is being put in place to eliminate card use and opt instead for the mobile phone/wallet, connected directly to a bank account in fiat, government-regulated currency.
It would be useful to know why those 30% of Americans don't have a debit/credit card. Is it an infrastructure problem? Is going online and buying things part of their day-to-day activities?
And for those areas of high credit card fraud, what do merchants do now? Accept checks, cash, ACH? And what do consumers do if they receive subpar merchandise? Etc.
I guess your argument is then about security. Your funds are as secure as whoever is holding them, whether it be in bitcoin or regular fiat through CC.
If you place your bitcoin on Coinbase, Bitpay, an exchange, or even on your own local wallet/cold storage, and one of these gets hacked (e.g. a hacker gets access to your private key), your funds are gone forever.
If you give your credit card info to a merchant and they betray your trust and charge you, you will 1) not lose your funds because you'll just charge them back, 2) they will be blacklisted by their credit card provider if chargebacks are too high. So this incentivizes merchants to not charge you illegally if they want to stay in business.
The Target, Sony hackings were indeed unfortunate, but they are exceptions rather than the norm. And they can also be likened to the many exchanges and wallets that have been hacked in the bitcoin world. Except in the latter case, consumers could not get their money back.
"There are many people who trade forex (like oanda.com) and gamble on sports or poker (like betfair.com) every day. The current payment methods make it difficult and expensive to deposit and withdraw on those types of sites because of VISA and MasterCard's rules and duopoly."
Yes I agree with this. Trading and gambling is really easy to do with bitcoin. And yes it's a nightmare with fiat. But I think most of these issues are due to government regulation (which is expected for these activities).
Many are moving to a subscription model per month (simple and predictable pricing) — think Spotify, Wall St Journal, etc.
But curious, what kind of things would you like to buy at 50cents or less online and that you really can't right now (either as part of a larger bundle or a subscription)?
Also, the blockchain is not particularly good at managing micro-payments. First because of miner fees and second because micro-payments without fees open the door to blockchain spam. Most of the bitcoin micro-transactions done today are centralized off-the-blockchain transactions.
Yeah I mean those are some problems but they're 1) not huge and 2) I don't think creating and adopting a volatile virtual currency is necessarily the best solution to those problems.
"I don't need to memorize an arbitrary 16 digits + CVV2 + Expiry Date"
Most times, you enter that information once (1-time mental cost) and the platform saves that info for you. Think Uber, Amazon, Venmo, and others. Also soon with your mobile wallet, the experience will only get more streamlined.
Also, if you think about it, how do you pay using bitcoin today? First you set up a wallet (with Coinbase, Bitpay, or someone else). Then you get verified. Then you purchase bitcoin, hoping to get it at a good price.
Then you browse the web hoping your merchant integrates with Coinbase/Bitpay. If not, they'll display a bitcoin address, that you'll then have to paste into your wallet, enter the correct amount, etc.
Even if we do argue that this will only get better, it's not gonna get much better than tapping "Buy" on your mobile wallet, that's already connected to your bank account/card. User experience is not an area where bitcoin adds value.
"deal with chargebacks and replacing my card if the merchant loses my card information"
Chargebacks are a form of consumer protection. Eliminating them benefits the merchant, at the expense of the consumer.
"One time my bank just canceled my card without giving me any reason besides 'security' and mailed me a new one. What would I have done if I were traveling at the time or needed to buy something in the meantime?"
Yes, that sucks. But how often does that happen? How big is this problem? And is adopting bitcoin (already a huge cost: mental adjustment, buying bitcoin, etc.) really a good solution to this problem? Or is it just switching to a bank with better customer service? Simple, BOA (in my experience), etc.
"Besides that, if you've ever tried doing anything online besides the straight purchase of a good or service (think forex trading, gambling, remittances) you'd agree Bitcoin is light-years ahead of the prevailing payment methods."
Yes, forex trading and gambling are absolutely fantastic to do with bitcoin. But this reinforces the argument that bitcoin is a speculative financial asset, rather than a currency used in day-to-day activities.
The remittance market is ripe for disruption, but a gateway model such as the one offered by Ripple would better fit this problem, in my opinion.
"Second, because convert-transmit-unconvert still bypasses many of the painful aspects of other money transfer mechanisms."
Using a credit card online or 1-click checkout isn't painful.
"Both buyer and seller only interact with entities they trust (coinbase and their bank)"
Pretty sure most people trust the bank that issued their credit card.
"no credit cards (and associated fees, chargebacks, and headaches)"
No chargebacks may be good for merchants, but not for consumers (no protection). Most of the CC fees are reimbursed to the customer in the form of rewards. In France for example, usual debit card fees are 0.5%, and credit cards with rewards are 2%-4%. In Australia, the government intervened and all card fees are < 0.5%. This was good for merchants but customers now don't get rewards/cashback/points on their card.
"the transmission process in the middle uses bitcoin in lieu of ACH or similar (avoiding many potential risks, reversals, and the various Bad Things that can usually happen if you pay directly from a bank account)"
Not sure what those "many bad things" are. I recently received subpar merchandise from a merchant; called my bank that morning, the transaction was reversed, almost no questions asked. There was a follow-up "investigation" that was in my favor. The fact that I can reverse transactions gives me peace of mind, otherwise known as consumer protection.
It's just seeming more and more to me that companies in the bitcoin merchant space are trying to find infinitesimally small optimizations they want to address in the current credit card system using bitcoin. It seems that they're trying to find (or sometimes create) a problem to fit bitcoin, instead of using bitcoin to solve an already existing problem.
I think they'll slowly find out, as Coinbase may be with this new feature, that bitcoin is actually not a good currency to be used directly, but rather as an efficient value transfer mechanism, under the hood. In other words, that the real value is in the blockchain, not in bitcoin itself. But I may be wrong.
In any case, I'm sticking to my credit card (and soon, tap-tap mobile wallet). Bitcoin doesn't really solve a problem for consumers in consumer-to-merchant transactions; mainly because, well, there really isn't a problem to solve to begin with.
What kinds of use cases can you think of for microtransactions?
There's a reason entire industries are moving toward the pay-by-the-month/year model instead of pay per use (Spotify, SaaS, online edition of newspapers, etc.).
> For example I wouldn't mind paying 0.001 cent to read an article.
The are operating as "custodians of customers' digital currency assets" (their words). That means they are a bitcoin/fiat bank.
Commercial banks make money on 1) currency conversion and 2) loans. Circle could offer these services in the future. Not tremendously excited about the announcement today.
The mainstream consumer still has no compelling reason to purchase or use bitcoin over fiat.
If someone steals your bank account number and charges you, you call your bank to reverse the transaction and block any future transactions from the thief :) did that yesterday, works like a charm.
Your credit card is just a means of payment (a key). Your wealth is stored at your bank.
All these merchants may have your bank keys, but they can't use it to charge you illegally because they will incur costs (a chargeback fee and then some). It a great system in which both the consumer and the merchant are incentivized to behave correctly...